There are some major life events that can put many of us in a financial ‘bad debt trap’. Such as student loans, credit card balances, and even large mortgage payments can all make us feel in a financial trap. If you’re feeling like there’s no way out of your debt, here are three bad-debt scenarios and options for overcoming the financial burden.
1. Student Loans
It’s very important to pay your student loans on time and never skimp on the payment. Student loans are usually in the form of installment loans, and if you make your payments on time and make the full payment due on each installment, you can really help strengthen your payment history, which can impact your credit score.
If you’re struggling to make the minimum payment, there are some options available, such as consolidating your loans or contacting your lenders and negotiating a lower rate. Be careful before considering either option, however, because depending on the route you take, it could show up on your credit report and affect your score.
2. Credit Card Charges
Creating a budget and adhering to a plan to pay off credit card debt can be a very rewarding accomplishment. Your first step should be to look at your budget to see where you can cut costs. Luxury expenses like dinners out on the town or designer clothes should be easily crossed off your budget lines. If you feel like you’ve already trimmed your budget as much as you can, there are some alternatives to consider.
One solution for handling credit card debt is to transfer your balances to a new credit card with a lower interest rate. Before you take advantage of credit card offers with a low interest rate, understand that many times this is just a limited-time introductory rate and that there may be other terms and conditions, such as balance transfer fees, that you need to consider.
3. Big Mortgage Payment
If you have equity in your home and solid credit, one option might be to refinance your loan for a lower interest rate or a lower payment. Refinancing isn’t for everyone and there are usually strict criteria to qualify for refinancing. Make sure you do your research and consult with the Doug Haldeman Team at 314-472-3684 .
If the timing and the market is right, you might consider selling and downsizing to get out of your high mortgage payment. If you have equity in your home, you may be able to earn enough profit to help get you out of other debts as well.
Whether these options work for your financial situation or not, one important factor to always consider is your budget. If you’re spending more than you’re bringing in, getting out of debt will always be a struggle. Understand the role that credit and budgeting plays in your financial decisions, and check with those you trust to make sure you’re making the right decisions for your lifestyle.
Contact Information:
The Doug Haldeman Team
Doug Haldeman NMLS#298419
Phone (314)-472-3684
